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Investor Channel is the communication channel between Pirelli and the financial community. Analysts, shareholders and web users can use the channel for direct dialogue with the Group. The blog is moderated by Pirelli Investor Relations.

A hard week from 13 to 17 December for the main international markets (Milan -2.0%, London +1.0, Frankfurt -0.3%, Paris +0.3%).
After Moody’s downgrade of Ireland (Aa2 to Baa1) and the decision to monitor Spain’s rating (AA1), fears for the financial stability of the peripheral countries in Euroland were reawakened. Bank and insurance shares suffered with the respective European benchmark indexes down by 2.8% and 1.4%.

The negative figures for new car registrations in Eastern Europe in November (-8.3% yoy) hit the Auto sector, down by 2.1% (DJ Stoxx Auto).
Tyre sector shares were hit too (Continental -6.5%, Michelin, -1.4%) suffering, in addition to the auto figures, from the continuous rise in the cost of natural rubber, with futures touching 4.7$/kg (RSS 3) and 4.6$/Kg (TRS20), .

Pirelli contained its losses closing the week almost at par (-0.3%) outdoing both the European benchmark index (+1.8pp) and the FTSEMib (+1.7pp). Share dealings fell with an average of approx. 1.6 million pieces exchanged (monthly average over 3 million).Centrobanca’s upgrade of the share (BUY at 7.35€ from 7€) following its reviewed assessment of the tyre business is worth note: +9% at 2.68 billion €, a multiple P/E of 10.7x in 2011 in line with the average of its peers but up on Michelin by 16%. Forecasts are for average annual growth in tyre profits of 6.5% and an EBIT margin of 9.5% in 2013 (EBIT of 556 million €).
The reduced risk of M&A, high exposure on emerging markets, “sound debt position” and “safe dividend policy” were particularly appreciated according to brokers. The development of business in Russia also acted as an important stock catalyst.
IMI bank’s addition of Pirelli to the “securities to bet on in 2011” is also worth noting. Its focus on the premium sector and redistribution of production (with the projects in China, Latin America and Russia) will enable Pirelli to achieve and probably exceed its objectives despite the constant increase in cost of raw materials.

The major international markets rose in the week from 6 to 10 December (Milan +1.8%, London +1.2%, Frankfurt +0.8%, Paris +2.8%), buoyed by recovery in the banking and insurance segments (European index +1.5% and +4.7% respectively).

The Auto&Parts sector remained substantially the same (-0.2%) reflecting the risk that China will abolish car purchase incentives (1.6 litres or less engines) at the end of December (duty on cars has been reduced to 7.5% from 10%).

The news from China and the progressive rise in the cost of natural rubber, with futures reaching maximums of 4.558 $/ton (9/12) in Tokyo, affected share prices in the European tyre segment, which had dipped by the end of the week: Michelin -3.1%, Continental -5.0%, Nokian -1.2%.

Pirelli closed at €6.14, a fall of about 1%. Less trading on average: about 3 million, compared to about 4 million last month. Deutsche Bank resumed coverage of the share with TP €7.6 and a BUY recommendation. According to the broker, exposure on emerging markets and in the premium segment will guarantee above-market growth for the company. Profitability decidedly better, with a forecast of 11.5% for ebit margin in 2013.